FSA Ombudsman Solves Your Federal Student Aid Crises

By Ben PopkenSeptember 10, 2008

Got a problem with your federal student loan? The Federal Student Aid Ombudsman specialists are here to help. First they’ve got a bunch of tips for you to fix your problem on your own. If all those don’t work, contact them by phone, fax, or mail and they will help you out. For reals. This is reader Trey’s great experience with them:

I recently finished law school and accepted a fellowship with the Department of Homeland Security. As part of my compensation package, DHS graciously offered to repay some of my student loans under a federal recruiting program. I was thrilled and immediately set about filling out the required paperwork. The last item I needed to supply was an Electronic Funds Transfer Number and Tax ID for my lender, EdSouth/EdFinancial. That, as it turns out was easier said than done.

I’ll spare you the details, but suffice it to say that I went round and round with EdSouth’s phone goons for more than three weeks, repeatedly explaining my situation and faxing documents which (they said) would make it possible for me to get the information I needed. After a final marathon phone call in which I spoke with three reps and two supervisors of ever-escalating grade, I finally got so frustrated that I threw my phone across the room.

At this point I was shaking with anger. I called three different lenders to try and just move the loans to another servicer that might be more receptive. As I was looking, I came across a webpage for the Federal Student Aid Ombudsman, a kind of Mr.-Fixit for disputes with lenders. I ran down their “Before You Call” list and found that I’d already taken all the steps necessary before contacting the Ombudsman’s office. I sent a brief e-mail explaining my situation and got a receipt a short time later.

Today, less than 24-hours later, I got a response from Thad Bartkowiak, an Ombudsman Specialist. He’d already investigated my situation, spoken with EdSouth, and obtained the federal payment number DHS will need to process my loan payments. The Ombudsman’s Office is a GREAT resource for anyone with student loans. Their website, http://www.ombudsman.ed.gov, has self-resolution tools as well as the complaint form that I used.

Yeah, my student loan problem is that I can’t consolidate my loans – I’ve filled out a bunch of applications and they’ve all been rejected. This would make more sense if my credit rating wasn’t in the 700s.

@nicemarmot617: Nobody wants to consolidate anymore because the interest rates are so low that they aren’t making any money off of consolidations. Ran into that with Sallie Mae, they said that they will no longer consolidate and you will have to negotiate lower payments or a forbearance if you have problems.

@madamdalriada: Yes, my BF works in finance and he explained the whole thing to me. I understand why it’s happening, but it’s so idiotic that I’m flabbergasted. Apparently, for banks, a credit crunch means they just don’t do anything but bleed money.

@teh: I did. I filled out their application, waited the stated week, called them. Their phone rang with no voicemail or answering machine and no one answered. I called back a few weeks ago and still nothing. Considering it’s the government, I wasn’t surprised.

I called the FSA Obmudsman a few months ago and while they could not directly do anything about my problem, they got me some phone numbers over at my old school that proved to be pretty valuable. No one wanted to give me any of this info, but the Ombudsman had it.

They also helped me with my problem. I had been going between 2 of my lenders for over a year, going round and round with the two of them. One of them promised to remove one of my loans, but I had consolidated with the other lender prior to learning that. Hence neither lender would take responsibility, and I wanted that loan gone like promised. It look over 6 months with the Obmudsman, but they did all the work and I would just call in to check in once a month or so. Much better for me comparatively to trying to get through the insanities of each lender’s CSR. I would highly recommend them.

In the interest of disclosure, I work in students loans on the FFELP side. We are technically a competitor the government’s Direct Loan Program.

One of the key pieces of the FFELP puzzle is the guarantor. They are charged with oversight of the lenders, so if you are having issues with a lender, they might be a good place to start. Every guarantor has an Ombudsman too. If you can’t get help from them the Dept. of Ed Ombudsman is a great resource.

As far as consolidation goes, technically, coach02740 is right, but there are a couple of loopholes to consolidate with Direct Lending ([www.loanconsolidation.ed.gov]). If you can’t get a FFELP consolidation loan, don’t like the income sensitive terms they have offered, or “intend” to use the Public Service Loan Forgiveness program, the Department of Ed will consolidate your loans for you.

I’m jealous. Despite calls for an independent body to address issues regarding student financial assistance, we have yet to implement anything like this in Canada. However, there are some lobbying watchdogs such as the [www.StudentLoanFairness.ca] coalition that are fighting for more transparency and fair, accountable treatment. In the meantime, students across the country are pulling their hair out!

I borrowed my way through college. I don’t recommend it. I had 32k in loans by the end of it. I thought I was smart when I refinanced them all, thinking that .25% was worth it. Trouble is, they ended up at 7.625. (Yes, some of my loans were at EIGHT PERCENT). Once you Re-Fi, you can *NEVER* re-fi again. trust me; I tried many times. That does not mean I suppose you could switch them all to a lower interest rate loan; but in that case you’re borrowing from peter to pay paul, and there you get into possible messes.

I suggest you NOT refi until you have investigated how the rates are, LONG-term. Will they go up, or down, in the near future?

Now, it seems, they are quite low. So low, in fact, that you may have trouble getting anybody to do it.

The happy ending to my tale is that my student loans are now PAID OFF, and Sallie Mae has been KICKED to the curb!

@Fist-o: When you do a consolidation loan, they just take the average of all of your loan interest rates and make that a fixed rate. So if you have a higher interest loan and a lower interest loan, it sometimes makes sense to consolidate. You are right about it causing more problems and costing more for some people. When you consolidate, make sure you get your total payoff amount from the lender and compare it to what you will pay if you keep your loans where they are.

If you do want to re-consolidate, you could possibly reconsolidate into the Direct Loan Program by asking to do the Public Service Loan Forgiveness program. ([www.finaid.org]) You don’t have to do it and there is no penalty if you don’t. There a calculator at [loanconsolidation.ed.gov] to help you decide if that is something that would be good to do.

I have 80K in student loans at just under 8% interest for a job that pays less than $42,000 a year. My brother went for a year to a technical college, they helped him get a job, he paid off his debt in 1 year and makes close to $56,000. If my stupid guidance counselours had told me college was such a scam I never would have gone. For those of you considering it, DON’T DO IT.

@harvey_birdman_attorney_at_law: it depends on what you intend to study, and most of all, how much grant money you can get. the way the system is set up now, college is really only doable for the very rich or the very poor. i was poor (and a good student) when i was accepted to a top private college, so the grant money i received covered almost everything. my senior year ended up being my most expensive, and i only paid about 4k that year (when the tuition alone, without including room & board, was about 32k).

unfortunately with out higher education system as it is now, the middle class is screwed.